Generally speaking when operating a company to conduct businesses, an employer needs to file taxes, whether the company made a profit or not. The company is responsible for Federal, state, and local taxes for the businesses. The company is also responsible for social security, Medicare, and unemployment taxes for each of its employees, regardless of how long the employee has worked for the company. Paying business taxes falls into two separate categories: taxes paid throughout the year, and taxes paid at the end of the year. Throughout the year, the company is responsible for payroll taxes that include Federal, local, and state imposed employee withholdings as well as social security, Medicare, and unemployment taxes. Agency imposed employee withholding is withdrawn from every employee paycheck when it is issued. At the end of the year, the company is responsible for reporting its overall income, along with any losses or gains. The taxes, if owed, can be paid online over the Internet, or by mailing a check to a tax agency. Various tax agencies (e.g., the Internal Revenue Service (IRS), state tax agencies, regional and local tax agencies, etc.) issue compliance requirements and rules regarding filing and paying business taxes including payroll taxes.
For example, the IRS uses the term “tax deposit” to mean “tax payment”, the term “monthly depositor” or “semi-weekly depositor” to mean “monthly payer” or “semi-weekly payer”, and the term “deposit schedule” to mean “payment schedule”. Before a business entity can determine when the tax payment is due, the business entity must first determine if it is a monthly depositor, or a semi-weekly depositor. In order to determine which schedule the business entity is on, the payroll records during the “lookback period” is examined. This period always runs from July 1 to June 30. For year 2006, the “lookback period” runs from Jul. 1, 2004 till Jun. 30, 2005. If the amount the business entity withheld for Federal payroll tax (referred to herein as 941 tax) is $50,000 or less, the business entity is a monthly depositor. If the amount during that period is more than $50,000, the business entity is a semi-weekly depositor.
If the business entity is a monthly depositor, the business entity is required to pay the taxes by the 15th of the next month. For example, the payment for Federal 941 tax withheld during August 2006 would be due on Friday, Sep. 15, 2006. If the 15th falls on a weekend or Federal holiday, the payment is due the next business day.
If the business entity is a semi-weekly depositor, the payment due date is as follows. If the payday falls on a Wednesday, Thursday, and/or Friday, the deposit is due on or before the following Wednesday. If the payday falls on a Saturday, Sunday, Monday, and/or Tuesday, the deposit is due on or before the following Friday.
For the 941 taxes, if the business entity is a monthly depositor and accumulates less than $2,500 in taxes for the month, the payment amount may be rolled over into the next month. The taxes become due, the 15th day of the month following the month in which the total surpasses the $2,500 limit.
Regardless of which type of depositor the business entity is, if Federal 941 withholdings for one day reach $100,000 or more, the monthly/semi-weekly deposit rules are accelerated and the payment is due the next business day. From that point forward, the business entity is required to pay all taxes on the semi-weekly schedule. This rule is referred to as the “$100,000” rule. Furthermore, if a late payment is made, the penalties can be as high as 10% of the payment due plus interest.
For Federal 940 taxes, the total tax is paid at the end of each quarter however if the employers total tax due is less than 500.00, they can roll the amount due into the next quarter. With the payroll history and scheduled future payrolls, we could accurately predict when the taxes will be due as well as prevent them from paying too early or too late.
New York State Income tax has complex due dates which are often difficult to schedule. There are two deposit schedules based on total annual tax liability. The “5 day after payday” schedule is applicable if total annual income tax liability is less than $15,000 and requires the payment to be made within five business days following the payroll that caused the total accumulated tax withholdings to equal or exceed $700. The “3 day after payday” schedule is applicable if total annual income tax liability is more than $15,000 and requires the payment to be made within three business days following the payroll that caused the total accumulated tax withholdings to equal or exceed $700.
Small business administration (SBA) size standards define whether a business entity is small and, thus, eligible for government programs and preferences reserved for “small business” concerns. Size standards have been established for types of economic activity, or industry, generally under the North American Industry Classification System (NAICS). In NAICS and depending on the particular industry, a business entity employing less than a certain number (e.g., 500, 1000, etc.) of employees may be considered as SBA.